Employee Benefit Liability is the third post in a series related to ERISA benefit plans. For business owners with an ERISA plan like a 401k there are certain risks and insurance coverages needed.
So what is Employee Benefit Liability, often called EBL?
EBL is a form of E&O or errors and omissions insurance. Typically attached to a company’s general liability coverage. It protects a company from claims which allege errors in the administration of an ERISA plan. Here’s an example. If an employer failed to add a beneficiary to an employee’s 401k and that employee dies, a claim can be made by the beneficiary. That claim would be for the benefits they should have received but due to an error by the employer, they’re left empty-handed.
The cost of Employee Benefit Liability coverage is cheap. It’s usually around a hundred bucks, but that’s because the scope of coverage is pretty limited.
In a prior post, we discussed Fiduciary Liability Insurance, which protects the trustees (the employer typically) of a plan from claims which allege a breach of fiduciary duty. EBL is NOT as broad as Fiduciary and limits protection to just errors made in a plan’s administration. Fiduciary not only include protection from claims of breach of duty, but also claims alleging errors in administration. As such, you don’t need to purchase both coverages. In fact, I recommend that if you do purchase Fiduciary that you DON’T purchase Employee Benefit Liability. Doing so could trigger the “other insurance” clause in both policies and lead to a mess if a claim occurs.
The larger your firm, the more complex these issues can be. Have questions? Concerns? Let’s set up some time for a conversation and see how we might be able to help you with your corporate insurance program. Hit the Next Steps button below! Thanks